Gold dips ahead of payrolls data; U.S. election in focus

By Jan Harvey

LONDON (Reuters) - Gold eased on Friday as the dollar clawed back some lost ground ahead of U.S. non-farm payrolls data later, but the metal stayed on track for its biggest weekly rise since mid September on jitters over next week's U.S. election.

Spot gold was down 0.1 percent at $1,302.36 an ounce at 1015 GMT, while U.S. gold futures for December delivery were little changed at $1,303.40.

The dollar steadied after recent losses on Friday ahead of the U.S. payrolls data at 1230 GMT, which will be closely watched for clues on the outlook for U.S. monetary policy.

The Federal Reserve signalled after a policy meeting earlier this week that it would go ahead with an expected rate hike in December, but poor economic data could throw that course into question.

"The risk in any of these numbers is that they start to reverse the positive trend of data that the Fed has been seeing, and defer that flagged hike further," Simon Weeks, head of precious metals at ScotiaMocatta, said.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The metal is up 2 percent this week, hitting its highest in a month, after the Federal Bureau of Investigation said last week it was reopening a probe into Democrat candidate Hillary Clinton's use of a private email server while Secretary of State.

Friday's announcement from the FBI narrowed Clinton's lead over her Republican rival Donald Trump, polls showed, rattling financial markets which had been pricing in a Clinton victory.

European shares hit their lowest in nearly four months and the dollar is heading for its worst week in twelve, despite its firmer tone on Friday.

"Gold implied volatility rallied sharply across the curve over the past week, as investors rotated to safe haven assets after polls tightened," Citi said in a note. "As the election keeps driving gold prices in the short-term, we expect gold vol to remain elevated into Election Day."

Gold prices in India swung to a discount this week as a rally in prices dampened retail demand, while buying in leading consumer China rose. Investor appetite looked firm, with the world's largest gold exchange-traded fund announcing a 4.4-tonne rise in its holdings on Thursday.

Silver was up 0.1 percent at $18.32 an ounce, on track to post its third consecutive weekly rise. Platinum was down 0.1 percent at $991.85 an ounce, while palladium was 0.6 percent higher at $619.70.

(Additional reporting by Apeksha Nair and Nallur Sethuraman in Bengaluru, editing by William Hardy)